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What does the term Financial Inclusion mean to you? Highlight the broad objectives of RBI’s National Strategy for Financial Inclusion. Also list out the challenges in making a financially inclusive India.
What does the term Financial Inclusion mean to you? Highlight the broad objectives of RBI’s National Strategy for Financial Inclusion. Also list out the challenges in making a financially inclusive India.
Financial Inclusion:
- Financial inclusion is the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost.
National Strategy for Financial Inclusion (2019-2014)
- RBI’s National Strategy for Financial Inclusion 2019-2024 sets forth the vision of key objectives of the financial inclusion policies in India.
- It also has the strategy to expand and sustain the financial inclusion process at the national level.
- It highlights the need for a broad convergence of action for all the stakeholders in the financial sector.
Objectives of NSFI:
- Universal Access to Financial Services: Every village to have access to a formal financial service provider within a reasonable distance of 5 KM radius. The financial services should also be hassle free and paperless
- Providing Basic Bouquet of Financial Services: It includes a Basic Savings Bank Deposit Account, credit, a micro life and non-life insurance product, a pension product and a suitable investment product.
- Access to Livelihood and Skill Development: Relevant information about the ongoing Government livelihood and skill development programmes to be provided to the new entrant to the financial system.
- Financial Literacy and Education: Easy to understand financial literacy modules with specific target audience orientation.
- Customer Protection and Grievance Redressal: Related to general services and storing and sharing of customer’s biometric and demographic data.
- Effective Coordination: Between the key stakeholders like Government, the Regulators, financial service providers, Telecom Service Regulators, Skills Training institutes etc. to make sure that the customers are able to use the services in a sustained manner.
Challenges:
- Inadequate Infrastructure: Limited physical infrastructure, limited transport facility, inadequately trained staff etc., in parts of rural hinterland and far flung areas of the Himalayan and North East.
- Poor Connectivity: certain regions in the country that have poor connectivity tend to be left behind in ensuring access to financial services thereby creating a digital divide.
- Convenience and Relevance: The protracted and complicated procedures act as a deterrent while on-boarding customers. This difficulty is further increased when the products are not easy to understand, complex and do not meet the requirements of the customers.
- Socio-Cultural Barriers: important worth mentioning is the lack of financial freedom among women especially in rural areas.
- Product Usage: Most of the newly opened bank accounts or other products tend to remain inactive, if the product holder doesn’t have a viable employment avenue. This trend hinders the sustainability of the mission-based approach of financial inclusion.
- Payment Infrastructure: Currently, majority of the retail payment products like UPI, RuPay, IMPS are operated by National Payments Council of India (NPCI). There is a need to have more market players to promote innovation & competition and to minimize concentration risk in the retail payment system.
Way Forward:
- Without financial inclusion, our vision of creating a New India will never become a reality. Hence India desperately needs the grand success of various financial inclusion programmes which are on board in our financial space.
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